An Oil for Food Exposé

By CLAUDIA ROSETT
October 3, 2007 - WSJ

Having stood trial for almost a month in a Manhattan federal courtroom, 83-year-old Texas tycoon Oscar S. Wyatt Jr. struck a deal Monday. He pleaded guilty to conspiracy to defraud the United Nations' former Oil for Food program for Iraq. Brushing past me on his way out of the courtroom -- he's clearly familiar with my writing on the subject -- he shot a remark: "You ought to be happy."

Actually, the pity is that the trial ended sooner than expected. Wyatt is the first major Oil for Food contractor -- anywhere -- to face a jury in open court. His weeks on trial brought the most vivid glimpses yet into the labyrinth of graft and greed in the U.N. program, operating from 1996-2003, that was meant to allow Saddam Hussein to sell oil solely to relieve suffering in his country.

Wyatt's trial also underscored the vitality and ingenuity with which private players can drive, fly, haggle and connive their way past embargoes -- especially those enforced by the murky, politicized and largely unaccountable bureaucracy of the U.N. (Benon Sevan, the former head of Oil for Food who was indicted in New York in January on charges of bribery and conspiracy to commit wire fraud, is a fugitive, denying wrongdoing but beyond reach of U.S. extradition on his native Cyprus).

Despite many investigations launched in the U.S. over the past few years, the inside players who witnessed Saddam's machinations firsthand have remained offstage, their stories distilled second-hand into written reports. Not here. Star witnesses facing Wyatt from the stand included two former Iraqi officials, Mubdir Al-Khudair and Yacoub Y. Yacoub. They have never before been questioned in a public setting, and were relocated to the U.S. by federal authorities this past year to protect them against retaliation in Iraq for cooperating in this probe.

Messrs. Khudair and Yacoub described a system corrupt to the core. Their duties inside Saddam Hussein's bureaucracy consisted largely, and officially, of handling and keeping track of kickbacks. That included who had paid and how much, and via which front companies. When Saddam's regime systematized its Oil for Food kickback demands across the board in 2000, keeping track of the graft flowing into Saddam's secret coffers became a job so extensive that the marketing arm of Iraq's Ministry of Oil, known as SOMO (State Oil Marketing Organization) developed an electronic database to track the flow of the "surcharges," as they were called.

To show how this worked, prosecutors last week produced a silver laptop onto which Saddam's entire oil kickback database had been downloaded by Mr. Yacoub, from backup copies he made just before the 2003 U.S.-led invasion of Iraq. With the laptop display projected onto a big screen before the jury, Mr. Yacoub booted up the system and into a query box typed "Coastal," the name of Wyatt's former oil company. Up came itemized lists of millions of dollars worth of surcharges he testified that Wyatt's company, or affiliated fronts, had paid to the Iraqi regime. These were broken down not only chronologically, but according to which front companies Mr. Yacoub said had channeled the money.

The other Iraqi witness, Mr. Khudair, corroborated parts of this scene. He explained to the jury a series of detailed notes taken at secret Baghdad meetings, which he had recorded by hand in desk calendars provided as gifts by oil contractors in Iraq.

In the end, Wyatt's guilty plea of conspiracy rested on a payment of about $200,000, made in 2001 through front companies into an Iraqi-controlled secret bank account in Jordan. But as witnesses during the trial sketched out the context, what came into view was a gigantic hidden world of dealings with Saddam's Iraq. From a cooperating government witness, Samir Vincent (who in 2005 pleaded guilty to a number of federal charges related to Oil for Food), the jury heard that Wyatt had paid Vincent's fees and expenses to make more than half a dozen trips per year during the early 1990s between the U.S. and Iraq to try to help Saddam out from under U.N. sanctions.

Also from Vincent, the jury heard that Wyatt's ambition was to become the sole buyer of Iraqi oil, or at least one of the biggest. Vincent would bring such gifts to the Iraqi regime as global positioning systems, and a satellite phone which Iraq's oil functionaries then used to call the U.N. in New York on a crystal-clear line, to try to haggle down the asking price set by the U.N. for Iraqi oil -- thus creating more room for payoffs and kickbacks.

When Oil for Food began in 1996, Wyatt was determined to clinch the first oil contract, which he did. But there were many other players, and it seems Wyatt had to struggle to hang on to market share in the face of competition, trying to bargain down the kickback demands but finally agreeing to pay in order to continue getting lucrative oil contracts.

Should we expect to see that silver laptop in heavy demand by scores of other U.N. member states trying to bring Oil for Food fraudsters to justice?

Nope. As it is, the U.S. stands almost alone in prosecuting the culprits and sending the guilty to prison. In Russia, China, Syria, Cyprus, Yemen, Egypt, Malaysia, the United Arab Emirates, Turkey and Jordan -- to name a few significant players -- there has been no such summons to justice. In Switzerland, home to a cosmopolitan nest of Oil for Food fronts, a number of companies have paid fines to federal and local authorities, but their names and the details have been kept confidential.

Here in America, under terms of his plea deal, Wyatt faces sentencing on Nov. 27 -- likely 18-24 months in prison and forfeiture of $11 million, which federal authorities say they will seek to transfer to the people of Iraq, who are the real victims of Oil for Food fraud.

In Switzerland, however, two of Wyatt's former business associates and alleged co-conspirators indicted in New York, Catalina Miguel and Mohammed Saidji, appear to be going freely about their business. One of the firms with which they have both been associated, Sarenco, is an active enterprise in Geneva, with Mr. Saidji's name on the registry documents.

I had no problem reaching Mr. Saidji there this week by phone. Before hanging up he told me, "I cannot answer any questions. I cannot make any comments." That is the kind of response worth keeping in mind as we now entrust our national security to U.N. sanctions on Iran.

Ms. Rosett is a journalist in residence with the Foundation for Defense of Democracies.